Asia benzene has been on a bull-run since mid-May, gaining a cumulative $160/tonne to date
Spot benzene prices in Asia soared to their highest levels in more than 16 months, backed by strong gains in the US aromatics markets as crude futures continued to strengthen, traders said on 23 June.
At midday, July was assessed at $1,415-1,420/tonne FOB (free on board) Korea, while August was assessed at $1,400-1,405/tonne FOB Korea, up $40/tonne from the closing prices on 20 June, according to ICIS. Prices are at their highest levels since mid-February 2013.
Four August cargoes were traded at $1,400-1,405/tonne FOB Korea on 23 June. “Prompt market in [the] US is about to reach $1,600/tonne FOB levels! This is pushing Asian prices higher,” a Singapore-based trader said. On 20 June, US benzene prices were assessed at $5.20-5.35/gal FOB US Gulf, while August barges were assessed as $4.90-5.10/gal, traders said.
Benzene prices in Asia have been on a bull-run since mid-May, gaining a cumulative $160/tonne to date, partly fuelled by short supplies in South Korea and Japan, as well as the strong crude prices, market sources said.
US crude was trading at above $107/bbl levels, while Brent was at around $115/bbl on 23 June.
At current prices, benzene prices in the US market were $50-104/tonne higher than in Asia, indicating that the window for arbitrage trades from the region to the west has remained open since early this month. The price gap can more than cover the $55-60/tonne freight cost for a 15,000-tonne vessel from Asia to the US, market sources said.
“Asia[‘s benzene market] is just tracking US numbers for now,” a South Korean producer said.
Strong demand from downstream styrene monomer (SM) sector drove up US’ benzene prices last week amid tight supply caused by some production issues at the aromatics plants.
“Asia prices are now trending beyond the [region’s] fundamentals,” a second Singapore-based trader said.
Benzene’s price spikes are worrying market players as production margins for its derivative sectors have turned negative, traders said. “We may hear more production cuts at downstream units such as styrene monomer (SM) or phenol soon,” a Chinese trader said.
The backwardation for August-September cargoes in the Asian markets has deepened to $30/tonne from $5-10/tonne in early June, market players said.
“There are Chinese and Taiwanese buyers for [benzene] imports. But such high FOB Korea numbers just shoved them to the sidelines,” a third Singapore-based trader said.
Market players are hopeful that new benzene capacity starting up next month should help tame the soaring prices.
“There are still two big benzene units to come on stream in mid-July. That should put off some steam in the Asian market,” a second South Korean trader said.